Boost for GSK as Hikma, Vectura expect 2020 launch for generic Advair

Hikma and partner Vectura Group, which has formulated the drug and designed the inhaler device, had engaged in a dispute resolution process with the US Food & Drug Administration, which last year called for 'major' amendments to their new drug application.

Concluding the dispute resolution process, the FDA upheld its original decision and requested Hikma completes a further clinical study of the generic drug.

Hikma had anticipated this as one of the potential outcomes and so expects to start enrolling patients in the trial "in the coming weeks" and anticipates being able to submit the data to the FDA "as early as possible in 2019".

The FTSE 250 company said it remained "committed to bringing this important product to the US market", with Vectura adding that both companies remain "confident in the approvability of the product".

Vectura's chief executive James Ward-Lilley added: "Assuming the successful execution of the new study and a standard regulatory review, we now expect a potential approval and launch during 2020."

He said as one of the few first generic drugs in this "complex area", the pair "have cleared up a significant number of issues which we believe has strengthened our insight and likelihood of success".

This gave Vectura further confidence in achieving US regulatory approval for the company's wider inhaled generic pipeline, which includes versions of the three current largest US inhaled brands, and added that the FDA's decision will have no impact on Vectura's revenue or R&D expectations for the year.

As for GlaxoSmithKline, for which Advair remains a key source of income, the pharma giant last month said if no generic competitor is launched in 2018 adjusted earnings per share were likely to grow 4-7% at constant exchange rate, rather than potentially falling to a range between "flat and down 3%" if a generic competitor in launched mid-year.

However, a second generic version of the drug, being developed by Consort Medical and Mylan is still awaiting a FDA decision on their re-filed application, which is expected in mid-2018.

After an hour and a half's trading on Monday, shares in Hikma were down 1.7% at 883p, Vectura was down more than 6% to 76.3p and GSK up 0.6% to 1,344.52p.

Broker Numis said: "We assume that the difference in opinion with the FDA comes down to the question of whether the original c.1400 patient clinical study met the FDA’s statistical definition of clinical bioequivalence (BE), and it seems likely that the second clinical study will enrol more patients in order to provide better powering/statistics to demonstrate BE.

On Vecutra's share price, analysts add: "We see the negative outcome of the appeal as in the price with the confirmation today that Hikma will conduct a further study as an incremental positive, indicating confidence in the ultimate approvability of the product."

Panmure Gordon analysts said the "certainty given" was "positive for Vectura, removing debate over timing", adding that "on our view the the current share price does not contain any value for the drug or others in the pipeline, including only the currently marketed products, making the stock good value at the current price".

After Vectura revised its strategy in January to focus on respiratory generics and the partnered programs, reducing investment in the earlier stage products, Panmure said this has "significantly reduced risk and we believe once investors become comfortable with the revised approach, potentially after some new deals we expect a rerating of the shares".

Citi, which had assumed a 2019 launch for generic Advair and $300m in peak sales to give Vectura a 17p per share valuation on top of an existing business valued at 97p, said it continues to believe market expectations for the rest of the pipeline are "too pessimistic".

For Hikma, investors may be waiting for Wednesday’s announcement of full-year results to evaluate just how much of a financial impact this will end up having over the coming year, said Henry Croft at Accendo Markets.

"For Vectura, on the other hand, a fresh setback in their bid to bloody the nose of larger rivals has seen previously loyal shareholders jump ship. Having already seen shares fall as much as 42% from their 2018 highs, waiting a further 12 months to receive any further news on the development of the Advair alternative – let alone whether that news is positive or negative – is too much of an endeavour for many to undertake. Whether the Wiltshire-based company can maintain its partnership with Hikma will also be of key concern to both parties."